Strongly disagree. Take a look at the bond market. The signal is clearly the opposite of your assumption . I’ll go with the money, and say you are wrong.
The argument can be made that this is a good thing. The yields on US corporates are really low. That’s because of more buyers than sellers. Simple stuff that. Lotsa buyers. Is the risk truly that low? I think not. Companies are still going to over leverage, misread the future, and go bankrupt.
Almost any tax increase has some negative economic impact. If we raise rates on workers, we’ll have fewer workers (people will retire sooner, potential second workers in the family will not enter the labor market).
Increasing the tax rate on capital gains will result is a substantial increase in US tax revenue. If there is some decrease in foreign investment in the US, it will be the result of the US getting closer to some foreign country’s tax rate. I expect a very small percent of all foreign investment.
Then, there is EG’s comment that our extremely low interest rates suggest we already have an abundance of capital. The best path to more take home pay for workers is by shifting the tax burden from labor to capital, not keeping taxes on capital low in the hopes of some tiny amount of trickle down.
Sure, no disagreement there.
Likewise almost all government spending has some positive economic impact. The trick is to try to tax where it will have the least impact and try to spend where it will have the most.
Good article here from The Economist (paywall alert) about international agreements to close these loopholes and havens around the world.
So it appears that workers just aren’t coming back into the economy. There are lots of “hiring” signs everywhere. Economists seem flummoxed and are trying to come up with various working theories.
I haven’t seen the following idea kicked around, just curious about it. I haven’t seen it mentioned anywhere, but surely someone somewhere has researched it.
All the COVID-19 deaths shifted a lot of assets (much appreciated in value homes & stocks (MFs, 401ks)) to younger “working aged” people who are choosing to use the money to permanently leave the workforce. In which case, we need to expect a lot more inflation.
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That’s a decent theory and probably contributing to the problem.
Others I have thought of:
- two income households that concluded they only really need one income and are happier having someone stay at home full time
- Lack of immigration
- People working side jobs for cash replacing their low income job they lost
In regards to point one, some are probably choosing to do that. Some have children and child care has become challenging. Either due to daycares having to close/quarantine intermittently, or something like that. And some of the people Covid has killed were the children’s daycare providers, like a grandparent.
This article notes that there is a gender gap, women are leaving the work force and men are coming back.
I think a lot of workers are leveling up. From what I can tell employers are able to hire, but they are struggling to keep. Ie they hire one and another leaves. Employees have all the power right now. Employers do not. It’s going to crimp corporate earnings so the news will have plenty to bemoan and gripe about. Meanwhile the bottom half of income earners will be substantially better off next year than they are this year. That said half of them will be pissed that gas costs $4 a gallon even though their paycheck went from $400/week to $800/week.
Edited: This article states 500,000 new businesses have been started this year.
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I haven’t, either. It’s an interesting thought.
Going just by the averages, the median net worth over age 65 is about $255,000. Split between a couple children or a number of children and grandchildren, it’s not enough to retire but it can be enough to defer going back to work.
700,000 deaths, maybe 1/3 had living spouses. Maybe 0.7% of workforce inherited money.
But, averages have problems. Odds are the lower income workers had lower asset parents.
This is my guess as the biggest factor.
Another “not mentioned so far” is simple fear of going into an environment where you can catch it.
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I am struggling with this one. Seems people are plowing into entertainment and eating out. I just am not sure this is really a factor or if it is that it is of a magnitude to really impact anything. I would love to see some data here but it’s squishy at best what anyone could collect.
My eyes tell me people are not scared to be in public. Packed football games every weekend on television, packed restaurants all over the country, packed vacation and resort areas, packed shopping malls and retail stores, etc, etc, etc. If people aren’t coming out they weren’t coming out prior to the pandemic either.
More to it than attendance at events and restaurants. Think working.
In my locale, masks are not mandated. But many, perhaps 2/3, businesses have signs on the door stipulating that masks are required. These are retail places: bakery, sandwich shops, grocery stores, etc.
It’s not far fetched to speculate the owners are concerned with their own health as well as their employees. But when a customer walks in w/o a mask, what do you do? Confront them? The counter folks I’ve talked to decline to be enforcers. It’s just too antagonizing. Would you work there for $8.50 per hour? Would you quit after being threatened 2 dozen times?
Just yesterday I went to the local hospital for some PT. A gentleman in his mid 40s walked by without a mask. I pointed to my own mask, as a reminder. He stopped and called me out as “leftist fascist”, and walked on in a stream of expletives. This is in a hospital. I know I wouldn’t want a daily diet of that. Maybe you don’t understand how stressful that is.
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Perhaps a bit of a bias in that sample. I don’t have data or an estimate, but I suspect at least some people don’t want to work in the restaurant/retail arena while the pandemic is on. But maybe it’s only like 0.1% of people, not sure.
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That’s fair I just wonder the magnitude. This problem is like many. There are lots of factors pushing on it. The political parties want a clean narrative though. Republicans want to 100% blame unemployment payments and Dems want to 100% blame public safety. Obvious neither of these is really true.
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Did any states extend the enhanced unemployment benefits after early September ending?
I am not seeing articles stating any states doing that.
So, how long do we wait after that point before we can form reasonable opinion on if the enhanced benefits were causing the worker shortage?
Didn’t all the states that ended early not see a boost in workers??
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I think you’re pretty much right. I don’t think any states have seen a boost since the enhanced benefits have terminated. It’s almost like they had no impact. (probably could have gotten by without the enhanced unemployment benefits if terminating them seems to have no impact)
This is a really strong pivot from “enhanced unemployment is causing the hiring crisis.”
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